Monday, 2 June 2008

The Commission monitors and enforces state aid rules in the internal market. The EU Treaty of Lisbon grants the Commission express powers to adopt regulations on block exemptions, although this reflects current practice based on delegated powers.

We look at the monitoring – notification and review – and the enforcement of EU state aid rules and the adoption of block exemptions in the light of the Treaty of Lisbon, as well as the current Treaty establishing the European Community (TEC) and the intervening treaty reform stages.

***

Article 108 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated version of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/92–93:

Part Three ‘Policies and internal actions of the Union’

Title VII Common rules on competition, taxation and approximation of laws

Chapter 1 Rules on competition

Section 2 Aids granted by states

Article 108 TFEU(ex Article 88 TEC)

1. The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market.

2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the internal market having regard to Article 107, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.

If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may, in derogation from the provisions of Articles 258 and 259, refer the matter to the Court of Justice of the European Union direct.

On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends to grant shall be considered to be compatible with the internal market, in derogation from the provisions of Article 107 or from the regulations provided for in Article 109, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known.

If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall give its decision on the case.

3. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the internal market having regard to Article 107, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.

4. The Commission may adopt regulations relating to the categories of State aid that the Council has, pursuant to Article 109, determined may be exempted from the procedure provided for by paragraph 3 of this Article.

***

In Article 2, point 78 of the Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) amended Article 88 of the Treaty establishing the European Community (TEC) (OJ 17.12.2007 C 306/69):

78) In Article 88, the following new paragraph 4 shall be added:

‘4. The Commission may adopt regulations relating to the categories of State aid that the Council has, pursuant to Article 89, determined may be exempted from the procedure provided for by paragraph 3 of this Article.’.

***

The TFEU table of equivalences tells us that Article 88 TEC first became Article 88 TFEU (ToL) in the original Treaty of Lisbon, but later renumbered Article 108 TFEU in the consolidated version (OJ 17.12.2007 C 306/211).

***

The current Article 88 of the Treaty establishing the European Community (TEC) is found under Title VI ‘Common rules on competition, taxation and approximation of laws’, Chapter 1 ‘Rules on competition’, Section 2 ‘Aids granted by states’, in the latest consolidated version of the treaties in force (OJ 29.12.2006 C 321 E/77–78).

Readers, who need the current Article 88 TEC or want to compare the TEC and TFEU texts, notice that there are two different kinds of amendments in Article 108 TFEU.

First, there is the specific amendment (mentioned above), which offers the Commission the possibility to adopt regulations on exemptions.

Second, there are the horizontal amendments mentioned in Article 2 of the Treaty of Lisbon. According to horizontal amendment 2(g) ‘common market’ was replaced by ‘internal market’ and in line with horizontal amendment 7 the words ‘Court of Justice’ have been replaced by ‘Court of Justice of the European Union’. Cf. OJ 17.12.2007 C 306/41 and 43. Both the current TEC and the future TFEU Article refer to other provisions, so the numbering in each is important in its context.

Article 88 TEC

1. The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the common market.

2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the common market having regard to Article 87, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission.

If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may, in derogation from the provisions of Articles 226 and 227, refer the matter to the Court of Justice direct.

On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends to grant shall be considered to be compatible with the common market, in derogation from the provisions of Article 87 or from the regulations provided for in Article 89, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known.

If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall give its decision on the case.

3. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the common market having regard to Article 87, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.

***

We have now seen the starting line (the TEC in force) and finishing line (contents and numbering of the TFUE when it has entered into force).

For the sake of a systematic comparison, we look at the arcana of the Article during the intervening treaty reform stages.

First, we turn to the European Convention, the closest thing to a constituent assembly we as EU citizens have had. The Article in question is located among the provisions on state aid in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 5 ‘Rules on competition’, within Subsection 2 ‘Aids granted by Member States’.

The attentive reader notices that the term ‘internal market’ is already in use, as well as certain terms abandoned later such as ‘European decision’ and ‘European regulations’ and ‘Council of Ministers’. In addition, there were a few changes in the wording, but without material effect.

The substantive amendment in Article III-57 of the draft Constitution proposed was the added fourth paragraph on the Commission’s powers to adopt European regulations relating to certain categories of state aid (OJ 18.7.2003 C 169/37):

Article III-57 Draft Constitution

1. The Commission, in cooperation with Member States, shall keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market.

2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a Member State or through State resources is not compatible with the internal market having regard to Article III-56, or that such aid is being misused, it shall adopt a European decision requiring the State concerned to abolish or alter such aid within a period of time to be determined by the Commission.

If the State concerned does not comply with this European decision within the prescribed time, the Commission or any other interested Member State may, in derogation from Articles III-265 and III-266, refer the matter to the Court of Justice direct.

On application by a Member State, the Council of Ministers may adopt unanimously a European decision that aid which that State is granting or intends to grant shall be considered to be compatible with the internal market, in derogation from Article III-56 or from European regulations provided for in Article III-58, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council of Ministers shall have the effect of suspending that procedure until the Council of Ministers has made its attitude known.

If, however, the Council of Ministers has not made its attitude known within three months of the said application being made, the Commission shall act.

3. The Commission shall be informed by the Member States, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the internal market having regard to Article III-56, it shall without delay initiate the procedureprovided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.

4. The Commission may adopt European regulations relating to the categories of State aid that the Council of Ministers has, pursuant to Article III-58, determined may be exempted from the procedure provided for by paragraph 3.

***

In the Treaty establishing a Constitution for Europe the provisions on state aid were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter I ‘Internal market’, Section 5 ‘Rules on competition’, with Subsection 2 ‘Aid granted by Member States’.

In Article III-168 of the Constitutional Treaty the IGC 2004 introduced no material changes to the draft Constitution. The ‘Council of Ministers’ had contracted to ‘Council’ and the ‘Court of Justice’ had expanded to ‘Court of Justice of the European Union’ following from terminological choices. The referrals were, of course, renumbered and there were minimal alterations to the wording.

But, since the Constitutional Treaty is the preferred object of comparison for many readers, Article III-168 is presented in full, as agreed by the IGC 2004 (OJ 16.12.2004 C 310/72):

Article III-168 Constitution

1. The Commission, in cooperation with Member States, shall keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market.

2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a Member State or through State resources is not compatible with the internal market having regard to Article III-167, or that such aid is being misused, it shall adopt a European decision requiring the Member State concerned to abolish or alter such aid within a period of time to be determined by the Commission.

If the Member State concerned does not comply with this European decision within the prescribed time, the Commission or any other interested Member State may, in derogation from Articles III-360 and III-361, refer the matter to the Court of Justice of the European Union directly.

On application by a Member State, the Council may adopt unanimously a European decision that aid which that State is granting or intends to grant shall be considered to be compatible with the internalmarket, in derogation from Article III-167 or from European regulations provided for in Article III-169, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the Member State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known.

If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall act.

3. The Commission shall be informed by the Member States, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the internal market having regard to Article III-167, it shall without delay initiate the procedure provided for in paragraph 2 of this Article. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.

4. The Commission may adopt European regulations relating to the categories of State aid that the Council has, pursuant to Article III-169, determined may be exempted from the procedure provided for by paragraph 3 of this Article.

***

We have seen that Article 108 TFEU took over the substantive amendment proposed by the European Convention and the IGC 2004. Article 88 TEC forms the basis, with the IGC 2007 adopting new terminology to the extent indicated by the Lisbon Treaty horizontal amendments.

***

What has been said about Article 108 TFEU?

United Kingdom

Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.3: Revised text of Part Three, Titles I to VI of the Treaty establishing the European Community (TEC): Internal Market and competition’ (Version 2, 23 October 2007) includes the current Title VI Common rules on competition, taxation and approximation of laws.

Peers highlighted the amendments to Article 88 TEC by Article 88 TFEU (ToL), to be renumbered Article 108 TFEU in the consolidated version, with the following comment (page 28):

“The amendment reflects existing practice.”

The analysis 3.3 and other useful Statewatch analyses are available through:

The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 108 TFEU, Article 88 TFEU (ToL) in the original Lisbon Treaty (page 11):

“Paragraphs 1 to 3 are unchanged from Article 88TEC. Paragraph 4 is new.”

The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed competition, including the state aid provisions, on pages 57 to 60.

It commented on Article 88 TEC and TFEU (ToL) on page 58:

“Amended Article 88 (Constitution Article III-168) adds a new paragraph (4) on categories of aid considered exempt from the conditions set out in paragraph (3) on compatibility with the internal market.”

The House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008) discussed the internal market and competition on pages 218 and 219, but I found no reference to Article 108 TFEU (Article 88 TEC and ToL) in this context.

‘Lagrådsremiss – Lissabonfördraget’ is the Swedish government’s draft ratification bill, published 29 May 2008, and sent to the Council on Legislation (Lagrådet). The draft deals with the EU’s internal policy areas in Chapter 23 ‘Unionens interna åtgärder’, and section 23.1 presents the internal market (Inre marknaden), on pages 175 to 181.

On page 178 the draft bill mentions the new fourth paragraph and remarks that the amendment reflects current practice. Notice that the Swedish government uses the original Treaty of Lisbon numbers, not the ones of the renumbered consolidated TFEU: